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Schapiro Calls for Tighter Regulations, Reform

Mary Schapiro, President-elect Obama’s pick to lead the Securities and Exchange Commission, today said she would seek to tighten regulations governing credit raters and investment advisers, to move more aggressively to go after bad guys on Wall Street, and to revitalize an agency battered by the Bernard Madoff case and failures overseeing investment banks.

Schapiro, seeking the endorsement of the Senate Banking Committee, pledged to fix many of the problems that have surfaced at the SEC over the past year. She said she would unleash the agency’s enforcement division to go “with full force and fervor against anyone who violates investors’ trust.”

Schapiro expressed support for reforming credit-rating firms, which failed to judge the riskiness of many of the complex securities that turned out to be ticking bombs on the balance sheets of banks. She said the compensation model for the firms, in which they are paid by companies to rate their debt, represents a conflict of interest that must be addressed.

She also said, among several options, a superior system might employ collecting fees from financial firms that would go toward a pot of money that would be used to pay for ratings.

Among other suggestions:
* Improve oversight of brokers by the SEC and other regulators, particularly oversight of auditors of brokers
* Improve use of tips by SEC staff
* Make it easier to allow big shareholders to suggest directors and have more influence over corporate governance
* Slow the move toward an international accounting standard
* More closely oversee the largely unregulated world of investment advisers
* Register hedge funds